Districts owe $13,000 per student ... and rising

Michigan’s
public schools have racked up $19.7 billion in long-term debt — mostly due to
construction costs — but aided by the state of Michigan, which loans the
districts money to make bond payments the districts couldn’t otherwise afford
to make.

Michigan
schools also owe the state $1 billion from loans the state has given districts
to help pay their bond payments as part of the Michigan School Bond
Qualification and Loan Program.

The
nearly $20 billion in long-term debt owed by schools is more than the $12
billion the state of Michigan’s budgets for public schools in one year.

The
state ranks 5th nationally in per-student amount of long-term debt.
Michigan has $13,000 per-student in long-term debt, according to 2008-09
figures from the National Center for Education Statistics, the latest year data
is available. On average, the U.S. has $8,400 per student in long-term debt.

"Taxpayers
should be concerned with the amount of debt that Michigan school districts are
accumulating,” said Michael Van Beek, the education policy director at the
Mackinac Center for Public Policy. “If these trends continue, they'll be on the
hook for decades to come for school loans from decades before.”

Most
of the long-term debt is due to capital costs incurred from construction.

For
example, the Chippewa Valley School District has been borrowing money from the
state of Michigan for 45 years and owes $120 million, according to Terry
Stanton, spokesman for the state treasury department. Chippewa Valley levies
residents 7.65 mills to pay part of its bond debt and borrows the rest from the
state, Stanton said.

Chippewa
Valley has grown from 9,450 students in 1992 to 16,284 in 2012. In the last 20
years, the district stated it has added eight school buildings, an alternative
education center and an early childhood center.

But
Van Beek notes that the trend in Michigan is for shrinking districts. There
were 1.64 million students in the state in 2001-02. That has dropped to 1.43
million in 2012.

Van
Beek notes there's also a built-in hazard of the state’s loan program — schools
have to ask for at least 7 mills to qualify for the loan.

“It
enables school districts to take out bonds for which they know they can’t pay
the bond payments on,” Van Beek said. “It encourages schools to continue to
build new buildings and to take out loans that they aren’t able to support.”